Gold Could Face Price Pressure, but Long-Term Outlook Positive — Market Talk

Gold and silver slide on prospects that Kevin Warsh will be selected by President Trump to be the next head of the Federal Reserve, analysts say. Gold and silver are pulling back on rumors of Warsh's appointment as next Fed chair, Maybank analysts say in a FX Research & Strategy report. "Warsh has been a long-time critic of ultra-loose monetary policy and is a former Fed Governor so market could be pricing in how his appointment could affect the future policy path," the analysts add. Spot gold slips 3.6% to $5,184.21/oz; spot silver is down 5.0% at $109.97/oz. (ronnie.harui@wsj.com)

By Rhiannon Hoyle

Aluminum Corp. of China and Rio Tinto agreed to buy a majority stake in Companhia Brasileira de Aluminio for about $900 million.

Chinalco subsidiary Chalco and Rio Tinto will acquire the nearly 69% stake in CBA from Brazilian conglomerate Votorantim for roughly 4.69 billion reais, equivalent to $903.5 million. The shareholding will be bought via a joint venture that will be 67% owned by the Chinese metals giant, the acquirers said in separate statements Friday.

The purchase comes amid a pickup in dealmaking in the metals and mining industry, as both Chinese and Western companies seek to expand their footprints through acquisitions.

Aluminum is expected to face a shortage in the coming years, as demand rises and new smelters become more difficult to build. The metal is widely used in the manufacturing of electric vehicles, jet engines and cell phones, among other things.

For Chalco, the acquisition "is aligned with the company's strategic direction of optimizing its global industrial layout and holds significant importance," it said.

CBA, Brazil's oldest established aluminum company, operates three bauxite mines that together produce around 2 million metric tons annually. It also has an aluminum operation in Sao Paulo that includes an alumina refinery, an aluminum smelter and other processing facilities.

Rio Tinto said the joint venture will tap into complementary expertise to "unlock the next phase of growth at CBA." Chinalco has an 11% stake in Rio Tinto.

The deal price of 10.50 reais a share in cash represents a 21% premium to CBA's 20-day weighted-average trading price, Rio Tinto said. Once the deal is completed, the joint venture will begin a mandatory tender offer for the remaining shares in CBA not held by Votorantim, it said.

For the Anglo-Australian company, the world's second-biggest miner by market value, the deal reflects a "strategy to deliver value for shareholders by extending our low-carbon, renewable-powered aluminum footprint in rapidly growing markets," said aluminum chief Jérôme Pécresse.

"It also provides the opportunity to grow our bauxite and alumina supply chain in the Atlantic region," he said.

Rio Tinto is meantime considering a possible combination with rival Glencore that could transform it into the world's largest miner with a market value of more than $200 billion.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

By David Winning and Kimberley Kao

The London Metal Exchange delayed the start of trading on Friday due to technical issues, temporarily stifling activity as commodities markets experience one of their wildest weeks.

Trading on the LME, which sets benchmark prices for a range of commodities including copper and aluminum, was offline for roughly one hour. The LME's electronic platform usually starts trading at 1.00 a.m. London time.

The outage happened after days of intense volatility in metals markets as traders responded to triggers such as the threat of U.S. military action against Iran and renewed tariff threats by the White House against allies including South Korea and Canada.

Copper prices have jumped to a record high as a weaker dollar and demand for physical assets fuels a buying frenzy. On Thursday, three-month copper futures on the LME surged by as much as 10% at their peak.

The LME outage was the second to roil a major exchange in as many months. In late November, CME Group wasn't able to offer trading in futures tied to U.S. stock indexes, Treasurys, crude oil and more for over 10 hours because a data center that it relied on had overheated.

Write to Kimberley Kao at kimberley.kao@wsj.com

Iron ore edges higher in the Asia session, reversing earlier losses in a volatile start to the day. As China's steel mills enter the off-peak season, Nanhua Futures analysts expect to see weakness in both supply and demand for the steelmaking material. However, they view downside for iron ore as limited given that steel market dynamics remain relatively supportive and the overall industrial chain remains profitable. The most-traded iron-ore contract on the Dalian Commodity Exchange is 0.25% higher at CNY793.0 a ton. (tracy.qu@wsj.com)

Copper futures dropped more than 3% to around $6 per pound on Friday, reversing a sharp rally from the previous session amid a broad retreat across the metals complex.

Investors locked in profits after copper, gold, silver, and other metals surged to record levels, while a nascent rebound in the dollar added further pressure.

Market participants also reassessed the fundamentals behind the recent speculative rally, which had been driven in part by expectations of higher long-term demand amid limited supply following decades of underinvestment in new mining projects.

Demand projections are supported by surging investment in data centers and the electrification infrastructure needed for AI services and electric vehicle charging stations.

Recurring tariff threats from US President Donald Trump further amplified the rise in metal prices, as investors sought hard assets amid economic uncertainty and deteriorating confidence in the dollar.

Asian investors are pouring record amounts into gold exchange-traded funds, leading some to question whether the rally in bullion is getting close to topping out.

Precious metals ETFs listed in the region have attracted $7.1 billion in net inflows in January, with a number drawing in all-time amounts of capital, according to data compiled by Bloomberg. The biggest gains were seen by funds listed in China that cater to retail investors, with Huaan Yifu Gold ETF alone luring in $1.9 billion.

The price of bullion has skyrocketed is recent weeks, with the yellow metal advancing more than 20% since the start of January, despite a pullback on Friday. High levels of buying by retail investors is often seen as a sign a rally is in its later stages and an asset is overvalued.

“We have been major gold bulls in this cycle,” buying both gold-mining stocks and ETFs, said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore. “However, the recent price action has become rapid, emotional and non-linear, which is a warning sign that the trend is extended tactically.”

Gold’s breakneck rally has been underpinned by elevated central-bank purchases and inflows into bullion-backed ETFs. Total holdings in gold-backed funds rose every month last year except May, according to World Gold Council data. Precious metals have also benefited from a switch away from the dollar due to unpredictable US policymaking and increasing American isolation.

Amid other warnings signs, gold’s relative strength index has climbed to about 90, above the level of 70 that is taken to indicate a pullback is overdue. A successful outcome from policies set by the Trump administration would accelerate economic growth, leading to higher interest rates and a stronger US dollar, pushing gold lower, the World Gold Council said in its 2026 outlook published last month.

Among other China-listed funds that have seen sizable inflows in January, the ChinaAMC Gold ETF drew in $420 million, while the GF Shanghai Gold ETF attracted $191.4 million, both set for records, data compiled by Bloomberg show.

Some silver-focused Asian ETFs are also heading for monthly inflow records. South Korea-listed Samsung KODEX Silver Futures Special Asset ETF has gained $231.6 million in net inflows for January, also set for a record.

Subscriptions Halted

In another sign of frenzied demand, China’s only pure-play silver fund — the UBS SDIC Silver Futures Fund LOF — paused subscriptions on Wednesday and halted trading Friday, after massive inflows drove the fund to an elevated premium over its underlying assets.

Asset management companies are set to respond to the rising demand for gold ETFs by bringing new products to the market, according to Bloomberg Intelligence.

“ETF issuers are likely to tap demand for safe-haven assets with more gold-related funds,” analysts Rebecca Sin and Michelle Leung wrote in a research note. “Hong Kong, which offers tools ranging from low-cost physical tracking to leveraged futures and mining equities, has two new listings this week as it seeks to strengthen its position as a gold trading hub.”